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The Wall Street Journal: Monday, February 25, 2013

For Penney’s Heralded Boss, the Shine Is Off the Apple (page A1): As he toured a J.C. Penney store before undertaking one of retailing’s most ambitious overhauls, Chief Executive Officer Ron Johnson bristled when a colleague suggested that he test his new no-discounts strategy at a few stores before rolling it out at all 1,100. “We didn’t test at Apple” the executive recalled Mr. Johnson, hired away from the gadget maker, saying. Seven months later, sales at the new Penney had dropped by double-digits. By the end of 2012, analysts were warning the company could run short on cash. Penney’s stock, which got a boost when the former Apple retailing chief took the job, finished last year down more than 40%.Things weren’t supposed to go this way. Mr. Johnson was viewed as something of a savior when he was hired in 2011—an Apple innovator who could help revive the chain’s tired stores and merchandise. But many people close to the company said Mr. Johnson ignored conventional industry wisdom and moved too abruptly to impose practices inspired by his time at Apple—a very different type of retail animal. Declaring the department-store system broken, he eliminated coupons entirely and did away with most of Penney’s sales—popular customer incentives that often drove seasonal traffic.

Gaps Persist in High=Speed Web Access (page A3): Federal stimulus programs that devoted $7.2 billion to bringing high-speed Internet access to rural communities have left some areas without access and others complaining they have too much. The Federal Communications Commission says some 19 million Americans, about 6% of the population, lack high-speed service, down from 26 million a year ago. Federal funds so far have fueled about 86,000 miles of broadband infrastructure, linking 12,000 town hubs, schools, hospitals, libraries and other anchors. These core networks, known as “middle mile,” are then tapped by private enterprises that take the signals the “final mile” to individual homes and businesses. “Few technological developments hold as much potential to enhance America’s economic competitiveness, create jobs and improve the quality of our lives as wireless high-speed access to the Internet,” President Barack Obama wrote in a 2010 memo.

Waltz, Hathaway Win Prizes as Edgy Humor Starts Oscars (page B1): “Argo” took home the best picture prize in an Oscar ceremony that featured a wide array of winners along with a mix of traditional musical numbers and edgy humor. Director/actor Ben Affleck’s film based on the true story of a CIA agent who rescued hostages from Iran by creating a fake motion-picture production, was a Hollywood comeback story. After Mr. Affleck was denied an Academy Award nomination for best director on Jan. 10, an omission that many thought spelled the end of his movie’s best-picture chances, the picture went on to sweep every major award, making it a presumptive favorite by Sunday. In a surprise, the best picture winner was announced by Michelle Obama, who appeared live from the White House. Complete list of winners.

GM Plans Smartphones on Wheels (page B3): General Motors Co. is escalating the battle over in-car connectivity with a plan to transform its vehicles into virtual smartphones armed with the fastest data speeds in the market. The auto maker will begin wiring its 2014 models sold in the U.S. and Canada with 4G mobile broadband technology, one of the first auto makers to do so. A vehicle owner would select a subscription package and connect to the Internet or WiFi at speeds that are 10 times faster than current market offerings. The 4G feature will be offered across GM’s Chevrolet, Buick, GMC, Cadillac, Opel and Vauxhall brands. The feature could usher in a slew of new options for the vehicle’s center console screen and for video viewers in the backseat. One such option is the display of real-time traffic jams or construction sites on a route map. Currently, viewers see a map showing only the driver’s current location and the distance to the destination.

China Quietly Invests in the U.K. (page C1): China’s foreign-exchange regulator has been actively but discreetly investing in U.K. property and infrastructure, marking a significant shift in how the secretive manager of the world’s largest foreign-currency reserves uses its funds. Since May, U.K.-registered Gingko Tree Investment Ltd., a wholly owned unit of China’s State Administration of Foreign Exchange, has invested more than $1.6 billion in at least four deals, including a water utility, student housing, and office buildings in London and Manchester, according to data providers that track property deals and disclosures by the companies that received the investments. In recent years SAFE, which is responsible for investing most of China’s $3.31 trillion worth of foreign-exchange reserves, has branched out beyond its traditional role of simply parking that wealth in low-risk government bonds, and has allocated a small portion to listed stocks and even private equity. It has mainly kept a low profile, taking very small positions in blue-chip stocks or allocating funds to third-party asset managers to invest on its behalf. But SAFE’s recent U.K. investments signal a new willingness to take significant direct ownership stakes, following in the footsteps of China Investment Corp., the better-known investor of Beijing’s sovereign wealth.

KKR Founders Get Pay Boost from Deal Flurry (page C3): A flurry of deals helped KKR & Co.’s founders together reap more than a quarter of a billion dollars in compensation and dividends last year. Henry Kravis and George Roberts, co-founders of the private-equity firm, saw the value of their 2012 compensation rise to more than $35 million apiece, up about 17% from the year before, according to a securities filing. In addition, each man collected more than $100 million in dividends paid on their stock holdings in the firm. Messrs. Kravis and Roberts each received base salaries of $300,000, unchanged over the last three years. In the case of Mr. Kravis, the firm paid $159,236 for his car and driver and $156,845 for assistants that tend to his personal business. Mr. Roberts’ car and driver cost KKR $231,765 while his personal assistants cost $120,019, the filing said. KKR also reimbursed the men a combined $3.2 million for use of their aircraft, a sum not included in their compensation. They declined bonuses, opting instead to pay other KKR employees “in order to motivate and retain them for the benefit of the firm,” the filing said. Chief Accounting Officer Todd Fisher and Chief Financial Officer William Janetschek, also saw the value of their 2012 compensation rise to $15.2 million and $4.6 million, respectively, according to the filing.

Overheard: Abercrombie & Fitch Switches Inventory Accounting Method (page C6): Abercrombie & Fitch’s favorite gimmick is making customers wait in line before coming inside its stores. Now, the company’s investors will also have to learn some patience. While announcing results Friday, the teen retailer said that it will abandon a technique called the retail method of inventory accounting. This required Abercrombie to mark down the value of its inventory when items were put on sale. The method caused earnings to be lower to adjust for the anticipated markdowns even if items hadn’t yet been sold. Under the so-called cost method for inventory, favored by most retailers, such adjustments will be made only for items that are marked down to levels below their production cost. The new method can make a big difference in quarters when Abercrombie aggressively marks down prices. In its fiscal fourth quarter ended January 2012, Abercrombie earned $124.7 million under the cost method but only $98.5 million under the retail method.

12 Debt Myths That Trip Up Consumers (page R1): Avoid debt if you can. If you can’t, borrow carefully and conservatively. So the conventional wisdom goes. But if you follow it blindly, you may miss out on key nuances of dealing with debt. For instance, consider store-brand credit cards. They often offer no-interest financing, and rewards on store-bought products. Sounds great. But did you know those attractive financing terms can come back to bite if you carry a balance after a promotional period? Then there’s mortgage debt. A big down payment may be a great way to steer clear of a huge home loan. But if you get the money for the down payment from relatives, lenders may scrutinize your financials closely. As many people look to rebuild credit or land loans, it’s crucial to know when the conventional wisdom makes sense—and when it doesn’t. With that in mind, here are some top myths that consumers fall victim to when borrowing today.

Wham! Ka-Pow! Zounds! (page R4): Comic-book investing is a funny business—and sometimes a profitable one. In August 2008, comic-book dealer Metropolis Collectibles Inc. auctioned a copy of Action Comics No. 1—which introduced the character of Superman in 1939—for $317,200. At the time, it was the largest sum ever paid for a comic book. Last November, Metropolis sold another copy of Action Comics No. 1. The price this time: $2.2 million. While some other asset classes withered in the wake of the recent financial crisis, comic books have emerged triumphant. They’re not all investment superheroes, but overall demand has risen steadily in recent years, says Ed Jaster, a senior vice president and comic-book specialist at Heritage Auctioneers & Galleries Inc. in New York. Last year, Mr. Jaster says, Heritage auctioned $37 million in comic books and comic-book art, more than triple the amount 10 years earlier. Mr. Jaster’s advice to buyers: “Buy what you love and can’t see yourself ever parting with. Deal with reputable people. Do your homework. Have fun! It’s a great hobby.”

You Want Me to Do What? (page R8): You trust a financial adviser to handle your money. But what about a missing child? Or a marriage at the breaking point? In the course of their job, advisers hear all sorts of secrets from their clients. But sometimes clients take the relationship a step further—and ask their adviser to help them manage a particularly painful problem. We asked several advisers to share some of their most unusual client situations (without revealing the clients’ identity). Here are their stories.